Our progress / Hot Topics

Financial markets megaregulator

Back to Media

Megaregulator Starts from Scratch

18.05.2013 17:57 / Kommersant

The State Duma has passed in the first reading the draft bill on transfer of financial markets regulation functions to the CB. According to the bill, the megaregulator will commence work as early as 1 August. However, there are indications that the FFMS merger will be tough. Yesterday, the Minfin held a session on the technical aspects of the merger, ruling that FFMS staff will not receive the four-salary severance compensation, while their CB payroll position is considered below par.

Yesterday, the State Duma passed in the first reading legislative amendments to 47 acts related to the FFMS-CB merger. The National Banking Council will be National Financial Council. The unified agency will be charged with all financial market development and legislation. However, payroll issues have replaced redistribution of functions as the focus of debate.

Central Bank Deputy Chairman Sergey Shvetsov told the State Duma yesterday that the newly transferred FFMS staff will receive a 1,8x pay rise. In five quarters following the merger with the central directorate they will be eligible for ‘a certain raise’. According to Deputy Head of Minfin Alexey Moiseev, the annual FFMS budget amounted to some RUB 3bn.

A memo prepared by Minfin for their series of debates on the megaregulator, quotes average salaries of RUB 58k at FFMS versus RUB 86k at the CB. The newly transferred wished for their salaries to be on par with the Bank of Russia Central Directorate, not the CB HQ, where the pay is 10% lower on average. However, the decision to increase FFMS salaries 1,8 times was passed. Besides, FFMS expected to receive four salaries as severance. Still, Minfin ruled yesterday that this option will be made available only to those who decide to quit.

“There is no financial incentive whatsoever”, states a source close to FFMS. “This is a de facto lay-off: the average FFMS paycheck is RUB 30k, and the 1,8x raise will hardly level the field of play”. Besides, insurance and stock market supervisors are distressed over their state service tenure will not be converted to CB track record that entitles them to a number of bonuses: “They will not take vacations for a half-year, and three years will pass before they are entitled to cheap loans available to Central Bank employees”, says our source. “As a result, several dozen service professionals have posted their CVs on job search websites”. According to CB’s Sergey Shvetsov, “the reform’s goal is not simply cutting costs, but making regulation and self-regulation more cost-effective. Therefore, the Central Bank may have to increase headcount as part of the merger. This will obviously lead to a certain increase in spending”, said the CB Deputy Head as quoted by Prime.

“I think we should move toward our goals quickly and effectively”, Dmitry Pankin told Kommersant.”If the bill is delayed, and FFMS staff are put at a disadvantage (demoted or lost their track record), this could affect the service and the continuity of financial market regulation, also complicating the megaregulator creation process”.

Tatiana Grishina

Financial markets megaregulatorProject Group №1